Saudi, Egypt economic coop crucial for region

The five-day visit of the Custodian of The Two Holy Mosques, King Salman bin Abdulaziz Al Saud of Saudi Arabia, to Egypt is seen as Riyadh’s political and economic support for Cairo to overcome
current economic and political challenges.
It also reflects the regional role of the two countries: Saudi Arabia, which is the top Arab economy, and Egypt, the most populous Arab country. So the closer ties mean the sisterly states could work together to tackle the
challenges. Egypt is also an exemplary investment market for Saudi Arabia.
The visit saw the signing of agreements of Saudi investments in Egypt worth about $25 billion. It comes at a time when Cairo is undergoing political and economic pressures due to years of domestic political turmoil that led to
economic recession and security challenges resulting from regional chaos.
Though the Saudi investments in Egypt are not new, the Saudi government’s pumping of investments into Egypt at this huge scale is quite interesting. Saudi Arabia’s strategy is to focus more on financial support that will also benefit Riyadh with return on investment and stabilize Egypt economically and
politically to resume playing its traditional regional role.
Saudi Arabia, along with other Gulf oil producers, has pumped billions of dollars, including grants, into Egypt’s flagging economy since the army toppled President Mohamed Mursi of the Muslim Brotherhood following the popular uprising against his rule in June 2013.
Over the past five years, Egypt’s foreign currency reserves declined from $36 billion in 2011 to $16.5 billion as of end of March 2016, and the government is currently grappling to reduce an ongoing budget deficit of about $36 billion.
After the 2011 turmoil, the economic growth was as low as 1.5 percent and it gradually increased until it reached 4.5 percent in the current fiscal year and is expected to touch 5.5 percent in the coming fiscal year.
Among the agreements signed by Egypt and Saudi Arabia during the King of Saudi Arabia’s visit are those related to housing projects in the Egyptian Sinai peninsula, the establishment of King Salman University in Tur town of South Sinai, the development of Egypt’s largest public hospital Qasr al-Aini, the building of a power station in western Cairo, causeway bridge linking the two countries, and the formation of a joint investment fund with a capital of 60 billion Saudi riyals.
These agreements demonstrate seriousness of the Saudi side to support the Egyptian economy. Indeed, capital flow to Cairo will definitely provide more employment and spur the economic growth.
The transfer of Saudi funds to Egypt will increase the currency reserves at the Egyptian central bank, and buoy the struggling Egyptian pound against the US dollar.
Further, the Saudi investments may lead to more Gulf investments in Egypt as the GCC states are greatly interrelated politically and economically.
While addressing the Egyptian parliament, King Salman pointed out that there is an important opportunity for Egypt and Saudi Arabia to cooperate in the economic domain, citing various memoranda of understanding and
investment contracts that were signed in his presence. About the causeway being built to link the two countries, he said, “This bridge will be a gateway to enhance economic movement in Egypt, a passageway for travellers and
pilgrims and will create jobs.” Egyptian President Abdel Fatah El Sisi, who
bestowed The Order of the Nile medal, Egypt’s highest state honour, on
the King Salman, suggested the causeway will be named after King Salman bin Abdel Aziz.
Egypt is a member state in the Arab coalition, led by Saudi Arabia to restore the legitimacy to Yemen. Both countries understand that cooperation in
tackling the challenges would yield fruits. Egypt eyes the Saudi’s economic weight, while Saudi Arabia looks forward to Egypt’s regional role.